Eskom's financial recovery: Treasury adjusts R70bn debt relief package

By Helmo Preuss

Eskom, South Africa’s state-owned power utility, continues to rely heavily on government support through a debt-relief arrangement, according to the National Treasury’s 2025 Budget.

Finance Minister Enoch Godongwana on Wednesday tabled the 2025 Budget before the National Assembly, saying, "The Eskom debt relief arrangements are also effective and contribute to the improved fiscal position. Eskom is now in a much better financial position than in 2023 when the debt relief wasoriginally announced."

He said as a result of these improvements,Treasury had decided to simplify the final phase of the debt relief package.The last R70 billion debt takeover will now be replaced with R40bn in 2025/26, and R10bn in 2028/29. This will result in a saving for the government of about R20bn.

Treasury said over the five-year period, the government will have provided Eskom with loans to the value of R230bn to assist the utility in repaying its debt. This is about R24bn less than projected at the outset, reducing the gross borrowing requirement. In accordance with the original agreement, the debt relief provided to Eskom will be converted into government equity over time.

The Treasury noted that while Eskom’s revenue rose by 14% to R295.8 billion in the 2023/24 financial year, this increase stemmed solely from an 18.7% tariff hike, as electricity sales dropped by 3%.

Treasury said t he Electricity Regulation Amendment Act (2024), which will establish a competitive market for long-term energy security, took effect on  January 1. Market rules and procedures are being finalised and preparations to license the National Transmission Company of South Africa as a market operator are under way.

The government is considering unbundling electricity tariffs into their different cost components, which would enhance transparency and fair cost recovery – and facilitate a competitive wholesale market.

Additional projects from government’s 360-megawatt battery storage programme have reached close and will soon proceed to construction. Raising the embedded generation licensing threshold has catalysed private-sector energy projects. The 2024 South African Renewable Energy Grid Survey identified 133 gigawatts of potential in wind, solar and battery storage, but grid expansion is critical to support these projects.

Statistics South Africa’s December 2024 electricity report revealed that total South African electricity consumption grew by 3.3% in 2024, reaching 212 952 gigawatt-hours (GWh). However, this figure remains 11.7% below the record 241,170 GWh consumed in 2017.

Eskom reported that its losses doubled to R55bn in 2023/24, driven by tariffs that fail to reflect costs, poor operational performance, non-payment by municipalities, and high finance costs. This prompted the utility to request a 36.15% tariff increase for 2025/26, though the National Energy Regulator of South Africa (Nersa) approved only a 12.74% rise, effective from April 1.

Nersa chairperson Thembani Bukula confirmed additional increases of 5.36% and 6.19% for Eskom’s 2026/27 and 2027/28 financial years, respectively. These fall short of Eskom’s requests for 11.8% and 9.1% over the same period.

The Treasury, in its Estimates of National Expenditure (ENE), projects Eskom’s revenue to grow at an average annual rate of 11.8%, rising from R337.1bn in 2024/25 to R470.8bn in 2027/28, as tariffs for directly supplied customers increase. Eskom has yet to detail how it will address the revenue shortfall arising from Nersa’s lower-than-requested approvals.

Municipal debt to Eskom remains a pressing issue, climbing from R74.4bn in March 2024 to R94.8bn by December 2024, according to the Treasury. It highlighted that 11 municipalities are enrolled in a debt-relief programme, which offers partial debt write-offs provided they stay current with Eskom payments and implement measures like smart meters to boost collection rates.

Expenditure in the transmission division accounts for 28.3% of Eskom’s total spending, rising at an average annual rate of 16.5% from R87.5bn in 2024/25 to R138.3bnin 2027/28, driven by grid expansion plans. Distribution spending constitutes 10.7% of the budget over the same period.

The Department of Electricity and Energy plans to issue a request for proposals in November 2025 for a pilot independent transmission project, inviting private-sector involvement to support the National Transmission Company in expanding transmission lines.

Eskom’s latest financial plan targets profitability from 2026/27 onwards, but escalating municipal debt arrears continue to threaten its financial stability. The debt-relief arrangement, introduced via the Eskom Debt Relief Act (2023) in July 2023, aims to bolster the utility’s balance sheet, enabling restructuring and investment in maintenance for a stable electricity supply. Eskom must comply with strict conditions, including the disposal of non-core assets, until March 31, 2026.

Labour federation Cosatu, responding to the Budget Speech, said it “applauds the outstanding work done by Eskom and municipal workers to overcome load-shedding. We are pleased that the debt-relief package has provided Eskom breathing space to ramp up maintenance.” Cosatu stressed the need for further support to tackle corruption, wasteful expenditure, and cable theft, while adding new generation capacity. It welcomed the R219 billion allocation for energy infrastructure, noting that affordable electricity is vital for the survival and growth of the economy, particularly in mining and industry.

Alberto Gambacorta, a general manager (Sub-Saharan Africa) for energy producer Scatatec, said, “Today’s Budget Speech comes at a pivotal moment for the country’s energy sector. As we navigate the ongoing energy transition, and work towards a more sustainable and resilient energy system, it is encouraging to see government commitments that support investment in renewable energy."
BUSINESS REPORT